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Urgent Stock Market Message

Trump’s Asia Strategy, Goals and Realities

Politics / GeoPolitics Nov 20, 2017 - 02:01 PM GMT

By: Dan_Steinbock


Trump’s critics claim he lacks a comprehensive approach to Asia. In reality, his current approach is aligned with moderate “America First” goals. But what did Trump really achieve in Asia?

If President Obama’s pivot was based on multilateral trade agreements, which were mainly geopolitical and predicated on exclusionary politics against China, Trump’s interest is in bilateral trade deals, which are fueled by US exports, foreign investments in US jobs and foreign purchases of American military weaponry.

That’s what Trump was after in the grueling 12-day Asia tour.

Deals with Japan

Outside of North America, Japan is America’s third-largest export market and second-largest source of imports. Japanese firms are the second-largest source of foreign direct investment (FDI) in the US, and Japanese investors are the largest foreign holders of US treasuries. After Trump withdrew from the Trans-Pacific Partnership (TPP), the White House’s focus has been on a redefined bilateral trade deal with Japan that would also include significant arms deals.

Abe pursues controversial strategic initiatives, including re-militarization, the US-style security legislation, and re-nuclearization. However, the share of Japanese trade covered by free trade deals or economic partnership agreements remains less than a third now (and would only rise to 34% even with the EU deal), which is half of that of South Korea (68%). Also, Japan lacks deals with its largest trade partners, China and the US, as well as India.

With his quest for a bilateral trade deal with Japan, Trump wants more US exports and arms sales to Tokyo, and Japan’s military buys from Pentagon. Abe seeks a trade deal to assist support structural reforms at home and US security assurances against China.

Tensions with South Korea

Since the 1950s, the Mutual Defense Treaty has allowed the US to dominate South Korea’s defense. However, after the Park impeachment, South Korea opted for a strategic U-turn in economy and strategic relations. Elected in May 2017, President Moon Jae-in supports the US anti-missile system (THAAD) and sanctions against North Korea, but only as long as it may bring Pyongyang to the negotiating table.

South Korea is the US’s seventh-largest trading partner and the US is South Korea’s second-largest trading partner. The two economies are joined by the Korea-US Free Trade Agreement (KORUS FTA). While Trump has stated its intent to review and renegotiate the deal, it has not specified what it would like to amend.

During his visit, Trump offered strategic security assurances in return for deals that would generate more jobs in the US and reduce the bilateral trade deficit. South Korea is likely to purchase advanced strategic assets, including nuclear-powered submarines and reconnaissance assets.

Strategic patience with China

In East Asia, Trump's priorities are secondary to his China agenda. In 2016, US-China trade amounted to $579 billion, while Trump’s focus is on the $368 billion trade deficit. Yet, merchandise trade is only one aspect of the bilateral economic relationship. China is America’s fourth largest services trading partner, third-largest services export market, and US has a major services trade surplus with China.

The combined annual US-China investment passed $60 billion in 2016, and China remains the second-largest foreign holder of US Treasury securities ($1.2 billion as of August 2017), which help keep US interest rates low.

In Beijing, Trump’s more moderate approach toward China paid off, as evidenced by the historic $254 billion deals. Some of these buys, including Boeing’s $37 billion aircraft order, were negotiated previously, while other pacts extend over long periods, including a 20-year shale gas and chemical project in West Virginia. Nevertheless, the volume of bilateral deals will ease tension between Washington and Beijing for some time to come.

Tributary deals with the ASEAN

Trump seeks to renegotiate many of the existing trade deals. So several Association of Southeast Asian Nations (ASEAN) countries that were not included in the current tour sought to preempt pressures.

During a recent visit, Premier Najib Raza announced that Malaysia’s national pension and provident funds would invest several billion dollars in equity and infrastructure projects in the US. Prime Minister Prayut Chanocha promised Thailand would buy Blackhawk and Lakota helicopters, a Cobra gunship, Harpoon missiles and F-16 fighter jet upgrades, plus 20 new Boeing jetliners for Thai Airways.

Singapore's Prime Minister Lee Hsien Loong showcased Singapore Airlines’ deal with Boeing for buying 39 B787 and B777-9 aircraft.

That is the regional way to offer dollar-tribute to the US hegemon.

“Strategic partnership” with Vietnam

While Obama’s goal was to push a “strategic partnership” with Vietnam, Trump’s objectives are more economic. Following the post-1986 Vietnamese economic reforms and US extension of normal trade relations (NTR) status in 2001, bilateral trade soared from $220 million in 1994 to $45 billion in 2015, which has turned Vietnam into the 13th-largest source for US imports (but only 37th-largest destination for US exports).

According to Trump, the US got a $12 billion order from Boeing, but critics claim that the deal with Vietnam’s VietJet airline was a result of Obama visit in 2016.  Nevertheless, Trump sees Vietnam as a deficit risk and the latter sees the US as captive of agricultural interests. 

Obama and his Pentagon dreamed of permanent US military installations in Vietnam. Trump might concede –if the price is right.

Strategic continuity with the Philippines

During the Aquino III years (2010-16), increasing cooperation with the US resulted in the Enhanced Defense Cooperation Agreement (EDCA), the return of US forces, rearmament supported by the Pentagon and the escalation of maritime conflicts with China. However, close US ties also coincided with deep strategic dependency on US, economic polarization within the country and the spread of drugs, corruption and alleged “narco ties” with the pre-2016 regime.

With Duterte, the US-Philippines relationship has been subject to a recalibration and, in the end of the Obama era, alleged US efforts at destabilization. Duterte’s sovereign foreign policy maintains US security guarantees but benefits from economic ties with China. Now the Philippines is linked to China’s One Road One Belt (OBOR) initiative, which supports the government’s infrastructure program to triple the Philippine per capita incomes in the next 25 years.

Concurrently, US-Philippines tensions have been eased as Duterte has developed more constructive personal ties with the Trump White House.

Free trade prospects

Trump also attended the Asia Pacific Economic Cooperation (APEC) Summit in Danang, Vietnam, followed by the 50th Anniversary of ASEAN. While trade ministers from 11 countries announced they would push ahead with a TPP without the US, the latter is a shaky TPP lite that will serve as a face-saving measure to Japan and as a hedge option to other nations.

The best APEC may hope for is long-term US-Chinese cooperation for the Free Trade Area of Asia-Pacific (FTAAP), which focuses on trade and investment and has room for both the US and China.

In effect, the ASEAN nations’ integration plan AEC 2025, which would be undermined by a "America First" policies, stands to benefit from China’s OBOR plans, and the Asian Infrastructure Investment initiative (AIIP).

New risks, new opportunities             

Except for China, Trump’s Asian tour was largely a hard sell of military assets across the region. While the conventional wisdom is that Obama achieved America’s pivot to Asia, the reality is that the pivot was mainly military and sought strategic gains.

This is why: During the Obama military pivot to Asia, Asia/Oceania received most of global imports (43%), according to SIPRI. US continues to dominate imports to its key security allies in Australia, Japan, and South Korea. But while the Obama pivot contributed to maritime conflicts in the region thus fueling demand for weapons, Pentagon did not cash the profits. Instead, today Russia accounts for most arms deliveries to Asia and Oceania (37%), followed by the US (27%) and China (10%).

What about the economic realities? Trump said that the Asian tour generated “at least $300 billion worth of deals,” which will more than “triple in a fairly short period of time.” Yet, the bottom line is $253 billion from deals with China and perhaps a total of $300 billion – if ASEAN deals that were negotiated prior to the tour are included. That may be far more than any post-Cold War US administration – including Clinton, Bush and Obama – ever achieved in Asia.

If US-Chinese economic ties prevail, China’s rebalancing and the rise of emerging Asia could contribute to far greater economic gains with the US and in the region.

Dr Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more information, see

© 2017 Copyright Dan Steinbock - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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